Auto Bailout Clears House but Faces Hurdles in Senate

Detroit's auto industry has faced setbacks in convincing opponents on Capitol Hill for a taxpayer bailout. As Bob Orr reports, Republicans are concerned with the rescue package's effectiveness. Video by
By Lori Montgomery and Paul Kane
Washington Post Staff Writers
Thursday, December 11, 2008

The House last night approved an emergency plan to prevent the collapse of the nation's domestic automobile industry, but the measure faces serious opposition in the Senate, where Republicans are revolting against a White House-brokered deal to speed $14 billion to cash-starved General Motors and Chrysler.

After battling through the weekend to reach a compromise with congressional Democrats, the White House yesterday dispatched Chief of Staff Joshua Bolten to sell the plan to restive Republican senators. But many GOP lawmakers emerged from a combative luncheon with Bolten unconvinced the plan would compel Detroit automakers to make the painful changes necessary to restore them to profitability.

After mostly partisan debate, the House voted 237 to 170 to approve the measure. But with Sen. Richard C. Shelby (R-Ala.) and other conservatives threatening to block consideration of the measure, even some Republican advocates of the bailout said it is unlikely to attract sufficient GOP support to win approval in the closely divided Senate.

"I don't think the votes are there on our side of the aisle," said Sen. George V. Voinovich (R-Ohio), a stalwart champion of the auto industry. "Some effort needs to be made to respond the concerns of my colleagues."

At the heart of the conflict is a debate over how to best help the car companies not only survive the deepening recession but rid themselves of a legacy of debt, high production costs and plush worker benefits that have left them unable to compete with their more nimble foreign competitors. GM, Chrysler and Ford have already moved to streamline costs; along with the UAW, they have offered to make additional concessions. But many Republicans think the automakers' problems could be more efficiently resolved by a bankruptcy court with legal power to dissolve existing contracts than by a government "car czar" whose actions could be swayed by Washington politics.

"Instead of the car czar, this ought to be titled the president's puppet," complained Sen. Bob Corker (R-Tenn.), echoing the concerns of many of his GOP colleagues. Corker yesterday unveiled an alternate proposal that would force bondholders in the car companies to accept equity as partial payment; force the UAW to immediately reduce worker pay packages to match Nissan, Toyota and Honda; and ban compensation to idled workers, among other provisions.

"If we don't have the forced restructuring plans in place, many of us don't believe that American car companies will come out of this in a competitive position and the taxpayers' money will be wasted," said Sen. John Ensign (R-Nev.).

Ensign added that he fears a car czar would not have the expertise to deal with the auto companies. "When GM, Ford, Chrysler, their management teams have not been able to run their companies, obviously, very well, how does anybody expect some car czar or some politician to be able to make the decisions that are right from a business standpoint?"

Democrats have resisted forced restructuring, arguing that, under the Bush administration it could amount to open season on the UAW. They also sympathize with the automakers' argument that bankruptcy proceedings would scare off potential buyers.

"People buying cars want to know that they'll continue to have a relationship with an entity that can service the cars," House Financial Services Committee Chairman Barney Frank (D-Mass.), the chief House negotiator on the package, said during House debate.

Frank added: "The greatest illogic is to argue that somehow in the bankruptcy courts . . . you have a far greater degree of expertise than either" Bush or President-elect Barack Obama, with their teams of economists, could muster.

White House Deputy Chief of Staff Joel Kaplan defended the measure, saying "we think we've come up with the right solution." Kaplan, one of the chief negotiators for the White House, said President Bush would personally lobby senators in the coming days.

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